Risk Management Control
The Board has overall responsibility for the company's system of internal controls which covers all aspects of the business.
Key risks include strategic, commercial, operational and financial risks. These risks are managed through a comprehensive internal control and risk management system.
Underlying this process is the Board's aim to safeguard shareholders' investments and the company's assets. It also aims to ensure that proper accounting records are maintained, and that the financial information used within the business and for publication is accurate, reliable and fairly presents the financial position of the company and results of its business operations.
In line with the Turnbull Report, Internal Control: Guidance for Directors of the Combined Code (Turnbull), the directors regularly review the effectiveness of the group's system of controls and risk management. The directors believe that the company maintains an effective, embedded system of internal controls and complies with Turnbull guidance. The system is designed to provide reasonable (not absolute) assurance of effective operations and compliance with laws and regulations.
As part of its review process, the Board considers new and emerging risk and also considers key external business drivers such as market trends and competitive activity. The Board also plays an important role in driving continuous improvement in management of risk by encouraging the sharing of best practice across the business.
Principal control structure and processes
A summary of the principal control structure and processes in place across the group is set out below:
Control structure and processes
The Board assess key areas of internal control and risk management and sets policy accordingly. It tasks each division to identify and document each significant risk and to implement appropriate controls for that risk. The Board also requires the operating divisions to manage, monitor and report on the effectiveness of these controls.
The divisions are supported by appropriate corporate management resource which provides the technical skills and expertise needed to supplement the divisions' own resource and to provide overall assurance for the major areas of risk. There are clearly defined lines of authority and accountability.
Both the internal and external auditors have reviewed the overall approach adopted by the company towards the risk management activities.
The audit committee overseas both internal and external audit procedures and monitors response to any significant control issues raised.
Roles and responsibilities for each area of identified risk are outlined below:
- Strategic delivery: through its regular meetings the Board assess performance against objectives. In doing so it considers performance data and also considers external dynamics, such as shifting customer and consumer trends that could affect the delivery of these objectives.
- Health and safety: a central team provides professional advice on best practice, audits health and safety procedures, and coordinates the investigation of all reportable incidents.
A risk management steering group identifies and manages all aspects of health and safety risk through site audit and implementation of recommendations, together with sharing of best practice.
- Talent management and human resources: a central team ensures the adequacy of existing management and plans succession through its organisational capability review.
- Food safety and quality: the technical services team assesses and approves raw material suppliers, audits the quality management systems in the group, provides guidance on compliance with food related and environmental legislation, sets technical standards and offers expertise on a wide range of food science and technology.
- Asset management and engineering: approves contractors in respect of building engineering and professional services. It also provides an expert consultancy for the acquisition, management and disposal of physical assets, as well as assessing and approving suppliers of capital equipment and non-saleable revenue items.
- Procurement: the central procurement team identifies and manages key suppliers on a group wide basis.
- Finance: each division prepares detailed annual budgets and strategic plans, which are reviewed and updated on a regular basis. Weekly and monthly accounts are prepared for each operating division and performance is monitored against the original budget, and any updated forecasts. The group's Operating board meets on a formal basis each month to review divisional performance.
There is a capital commitment which meets on a bi-monthly basis. Its responsibilities are to set policy, to oversee the capital expenditure planning and budgeting process, and to approve expenditure up to an agreed level delegated by the full Board.
The internal audit function reviews the standard of internal financial control and the accuracy of financial reporting through a rolling cycle of audit visits under a programme of activity approved by the audit committee.
The central finance function obtains advice and provides adequate insurance cover for major losses with appropriate levels of deductibles, through a group programme with external insurance brokers. This cover is reviewed and negotiated annually.
Financing and treasury management oversee the principal areas of treasury risk including liquidity, interest and currency risk. - Information technology: the Information Services function provides appropriate infrastructure and back up services to the business.
- Legal: provides and obtains advice on a full range of legal issues across the group, and ensures good title to properties and intangible assets.
- The Northern Way: evaluates community, environment, workplace and marketplace risks and ensures that there are effective systems in place for managing such risks. Further information is provided in The Northern Way.
Review process
An ongoing review process includes an assessment of internal controls and, in particular, internal financial controls, reports from the internal audit function as well as the external auditor on matters identified in the course of its statutory audit work.
Divisions and specialist functions report by exception on any matters arising during the year to the monthly meetings of the Operating board. The results of the formal half yearly reviews are taken forward to the audit committee.
An ongoing process of identifying, evaluating and managing the significant risks faced by the groups is in place and is regularly reviewed by the Board and accords with Turnbull guidance.
